What is the expected return of each asset

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Question - An equity analyst has projected the expected returns on the shares of three publicly traded corporations, ABC Inc., XYZ Corp, and LMN Ltd under four different economic conditions. The probabilities of each economic state were determined by the Central Bank and are shown in the Table below.

State of Probability of Return on ABC Return on XYZ Return on LMN economy state of economy in state of economy in state of economy state of economy

Boom .30 0.050 0.240 0.300

Growth .40 0.050 0.120 0.200

Stagnant .20 0.050 0.040 0.060

Recession .10 0.050 -0.100 -0.200

Using the information in the above table answer the following questions:

a. What is the expected return of each asset?

b. What is the variance and standard deviation of each asset?

Reference no: EM133072185

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